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US Returnee
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 is it worth buying a house for $4,00,000 ?
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Posted on 06-25-13 10:47 AM     Reply [Subscribe]
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Here's my scenario:

I currently make $80K per year salary. My wife is a housewife for now (she's pregnant). I was thinking of buying a house now. We live DMV area and the houses are really expensive here compared to Midwest or other states. The house that i am looking (townhouse) is coming around $400,000. So my question is, is it worth paying $400,000 for a townhouse in this area ?

Or just move to different state and get a single family house for around $250,000.

I know main thing is a Job, but i should be able to get a job that pays around $70k - $80k in some other states as well.

Thoughts ?

Thanks.

 
Posted on 06-25-13 10:59 AM     [Snapshot: 35]     Reply [Subscribe]
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i would say move to other states such as WA or CO. housing are cheaper, plus good environment for kids. easy laid back life plus in a long run u'll save more. even if you have to take 10 thou a year cut in your pay u will save twice than that with ur mortgage payment. btw, what do u do for job?
 
Posted on 06-25-13 11:00 AM     [Snapshot: 23]     Reply [Subscribe]
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 It's a totally personal decision, but I would go ahead and do it before the interest rate and prices goes up further. Unless you are into Cali, what is out there like in midwest? Yes, DMV has hurriance and stuff like that, but nothing like other natural disasters like other parts of the country. 

What I understand is that home prices have gone up by 3 to 8 times in the last twenty years in DMV areas. One thing for sure, your area is not going to die down anytime soon. That's a fact. Not every part of MD or DC, but VA is a great place to raise kids. 

So, choice is yours....big house in a big lot, or active living (for you and your kids) in a smaller house. 

 
Posted on 06-25-13 11:04 AM     [Snapshot: 39]     Reply [Subscribe]
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 In my opinion the main question for you to think about are:
1. Do you love/like that place? Do you enjoy living in that place?
2. Do you think you have everything in that place that you are looking for? Are facilities good over there?
3. Do you like your job?

If yes then, do similar house cost the same in that area.

If yes then don't move.

If no, think again.



 
Posted on 06-25-13 12:16 PM     [Snapshot: 168]     Reply [Subscribe]
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There must be a reason you are in this area and to move to any other location just because houses are cheap there makes no sense. Will you find similar job in the other area, will you be okay with the community in that area, what other factors will affect your decision; you gotta weigh them all in.

I agree with Eutab4. Home prices and interest rates are already up compared to last year or spring of this year. It will cool down after the summer but the rates might not get any better. Prices in a good neighborhood will never go down in DMV area (rule no 2 in real estate: Never say never) until you decide to buy. The market might be crazy right now with summer heat and too many bids and it certainly is seller's market in DMV area.

Good luck with your purchase.
 
Posted on 06-25-13 12:31 PM     [Snapshot: 202]     Reply [Subscribe]
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Come to Phoenix :) You can get a pretty Descent House for 150K - 200K 

 
Posted on 06-25-13 12:42 PM     [Snapshot: 171]     Reply [Subscribe]
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I personally think it is expensive for a 80K salary. A townhouse, not even a real house. Yes, if you absolutely love the place and the job. Friends and family in the state? If your wife can work after pregnancy, that will give an xtra boost to the expenses. But if you have doubts and think you can get a similar job with less pay somewhere, I would recommend you think hard before you have a child. A house and a child will make your life almost "non-movable", you'll be stuck in that place for a very long time. Why not make the best decision when you can.
I was in a similar situation and the house price and my income were around your ballpark. I didn't like the weather. I could have, but I finally decided to move to another state. I make less now, but I got a house half that price, and the weather is great. I don't have kids, that helped. 
Talk to your wife and decide. Good luck.
 
Posted on 06-25-13 1:48 PM     [Snapshot: 343]     Reply [Subscribe]
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First of congratulations US Returnee and family. I have to agree with Vhotee here. I don't think it will be a sound financial decision to get 400K house, sounds little bit expensive for 80K salary. but i guess it would also matter as to how much you have for downpayment.

Having a house adds additional costs such as HOA fees, maintenance, more bills for utilities, garbage, electricity etc. Plus when you buy a house you automatically tend to go get more stuffs to fill your house :) hehehe like furnitures, electronics etc..

so think hard. write all the expenses you can think of for owing a house. do the maths and it will help you. we did the same ...keeping track of our income and expenses for more than a year on monthly basis before getting our first house and it helped us a lot to find out exactly how much we could afford.

well good luck with your decision!

 
Posted on 06-25-13 2:10 PM     [Snapshot: 396]     Reply [Subscribe]
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Since we are focusing on the affordability of a house, why not actually use the economic tools out there?

First of all, can you afford a 400K house given your salary?
Use this tool:
http://www.zillow.com/mortgage-calculator/house-affordability/
This tool says if you have a saving of over 20K, then you can afford a house worth 333k.

Another tool:
http://www.realtor.com/home-finance/financial-calculators/home-affordability-calculator.aspx

Surprisingly this one gives a lower budget to you, somewhere around $240k depending upon your saving and debt payments.

Finally this one:
http:///calc-howmuch.html
This one says around $300K

All of these assume a downpayment of $20k. Regardless of assumptions used, it seems you shouldn't go above $330K for a house.


I know finding a house in a decent DMV neighborhood below 400K is impossible. You might consider going farther away from the metro region, settling on an up-and-coming neighborhood whose price hasn't ballooned yet or settling on a very small condo.

Tool below shows whether it is better to rent or own:
http://www.nytimes.com/interactive/business/buy-rent-calculator.html
 
Posted on 06-25-13 2:13 PM     [Snapshot: 411]     Reply [Subscribe]
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I personally think it's expensive for my salary and that's why i want to move to different state and get the house for half the price !

I am pretty sure i can get a job around 70K in other states and get the house for half the price.

Thanks.

 
Posted on 06-25-13 2:29 PM     [Snapshot: 440]     Reply [Subscribe]
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Here is another rule:

 “The market value of the home you purchase should be less than three times your household’s total annual realized income.”

http://www.getrichslowly.org/blog/2011/02/09/nine-lessons-in-wealth-building-from-the-millionaire-next-door/


 
Posted on 06-25-13 7:54 PM     [Snapshot: 716]     Reply [Subscribe]
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 With new kid coming soon I really think 400k house is expensive for your income, but again it might be affordable if you already have big savings for downpayment. Just my $0.02.
 
Posted on 06-25-13 10:58 PM     [Snapshot: 913]     Reply [Subscribe]
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 Forget about the market prices , the mortgage rates and all other stuff . Its always better to buy house in this economy as housing market is getting better. As far as other state comparision ,no states among can be comparable .
Bhakta pur ma ghar liyera driving garnu huncha ki ring road bata subway linuhuncha (wish there was metro ) .!
 
Posted on 06-26-13 9:56 AM     [Snapshot: 1204]     Reply [Subscribe]
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US returnee,
We wish we had more information about your situation, especially your financial, and plus all other factors..But with my personal experience I am going to write few things assuming that you fall in standard category.
No one knows better than you, your current situtaions.
Do not fall for all those online Mortagage calculators, its not useful; everyone case is differnt.
My personal view; it is quite expensive with your current situations for 400K house and 80K salary and wife not working and expecting a child.
Your Monthly expenses will double once u get the house and add that to when you have a baby, another expenses. And I dont think your wife will soon join the workforce once u guys have baby.

You might just live paycheck to paycheck, and thats a rough situations to be when you dont have chusions. Thats what brought down the housing market when all ppl leaving paycheck to paycheck got the mortagage.
Another Point -
Mortagag, these days are tough So please before you get into looking the house, get some pre-approvals, check your Credit history and do some analysis of your own.

With your second concerened - moving out and getting a less expensive house might seem a better idea from financial point of view, but then what other things should you consider?

For me, I decided to get in "OK" negihborrhood with Medium range ( I guess) but then I choose 15 years becuase I dont want to pay mortagage for the rest of my life.

And yeha most of the ppl are right Rates are going High, especially in last few months and even the house price too, especially the new construction.
Hope this helps; just my 2 cents, spend it wisely !!!
Last edited: 26-Jun-13 09:58 AM

 
Posted on 06-26-13 7:51 PM     [Snapshot: 1461]     Reply [Subscribe]
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With 15 years mortgage you would pay less in interest but pay more in monthly mortgage. If you are tight in money and likely won't have any significant savings in next few years I suggest signing for 30 years mortgage. The interest rate is little high but your monthly mortgage is much more less. In case your financial status improves in next few years you can always make more payments than monthly due and reduce total interest paid considerably. Paying little more money at beginning is much secure than go default on larger due with 15% mortgage.
 
Posted on 06-27-13 9:26 AM     [Snapshot: 1662]     Reply [Subscribe]
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Khairey good point !! not only Interest rate is lower in 15 years, you will be paying interest only for 15 years rather than 30 years. But yes the downside is ur monthly payment will be higher. There are pros and cons for every type and depending on the need of your finanacial and current situations you have to choose the best for you.
Even my mortgage broker suggested me that I only put down 3 % and go for 30 years and invest my money where I can get at least 5-6 % back. But then I decided to do otherwise and did a big down paymnet and did 15 years and my rate were amazing at that time 2.652%.
Becuase I want to be mortagage free first and than think about future investement.
BTW, at least have 6-12 months of backup savings money when you get the house just in case you are out of the job so that you are not behind payments.
 


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